State Bank

A state bank is generally a financial institution that is chartered by a state. It differs from a reserve bank in that it does not necessarily control monetary policy (indeed, the state in question may have no legal capacity to create monetary policy), but instead usually offers only retail and commercial services.

A state bank that has been in operation for five years or less is called a de novo bank.

In the United States the term "state chartered bank" or "state chartered savings bank" is used in contradistinction to "national bank" or "federal savings bank", which are technically chartered across all US states. A national bank must have "National" or "N.A." in its corporate name, a Federal Savings Bank must have "Federal" or "F.S.B." in its name, while a state chartered bank cannot have "National" or "Federal" in its name. All national banks and savings institutions are chartered and regulated by the Office of the Comptroller of the Currency. State banks are chartered and regulated by a state agency (often called the Department of Financial Institutions) in the state in which its headquarters are located. In addition, state banks that are members of the Federal Reserve are regulated by the Federal Reserve; state banks that are not members of the Federal Reserve are regulated by the Federal Deposit Insurance Corporation (FDIC). Therefore, virtually every state chartered bank has both a state and federal regulator. There are a very small number of state banks that do not have FDIC insurance.

Each Australian state formerly had a state bank, but all have since been privatised. Although the Commonwealth Bank of Australia was to some extent a state bank (although owned by the Federal or national Government and undertaking central bank functions until the split of these functions into the Reserve Bank of Australia in 1959) by the above definition before privatisation, the word ‘state’ in Australia refers predominantly to the subnational entities.

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